Assume That a Speculator Purchases a Put Option on Dollars

question 27

Multiple Choice

Assume that a speculator purchases a put option on dollars (with a strike price of £0.84) for £0.03 per unit. A dollar option represents 50,000 units. Assume that at the time of the purchase, the spot rate of the dollar is £0.85 and continually rises to £0.88 by the expiration date. The highest net profit possible for the speculator based on the information above is:

• A) £1,500.
• B) -£1,500.
• C) -£0.
• D) -£3,000.

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